Wednesday, February 26, 2014

One More Time: Bitcoin Is Not a Libertarian Money

Despite many posts on the topic, I am still getting many emails similar to this tweet:

@WenzelEconomics I'm shocked to see a libertarian speak out against a free market currency. You are a libertarian, correct?
— Dwayne Chenier (@DwayneChenier) February 26, 2014

First, Bitcoin is not a money. It is an awkward transfer system, a changing in-price American Express electronic travelers check-type instrument. No retailer is pricing goods in terms of Bitcoin. Prices are set in dollars and then a Bitcoin price is determined based on the then price of Bitcoin, BUT no one is setting prices or wages in a fixed amount of bitcoins, such pricing on a broad scale would indicate it is becoming a money, but that is not happening anywhere.

Second, just because something appears on the free market does not mean it can't be criticized or that it must necessarily be a solid product, afterall Paul Krugman books appear on the free market. Nuff said.

It is really difficult to see how any currentinternet currencies are superior to gold and silver in terms of privacy and untrackability---and Bitcoin is far from such, Indeed, as Gary North astutely points out, top Bitcoin operators are now running to the government to be regulated (SEE Bitcoins, Stage 2: "Bring in the Feds!")

However, when you yank away the "promise" of anonymity that pulled many libertarians towards this solution, what you are left with is a totally traceable 100% digital currency, not unlike what many on the fringe have been warning about for years. If bitcoin 2.0 or "govCoin" were to become that currency, wouldn't that be ironic?

Is there a problem with bitcoin really? Or, isn't it the backing? Can't fully trackable, digital money titles serve consumers in ways that paper titles cannot? (And vice versa?) Isn't bitcoin just the first real application resulting from the introduction of the Internet into a world of illusory money titles? What if you could choose t title your real money in paper, or electronically, or not at all? Why are we insisting there can be only one, when there has always only been one, and represented by these others? Seems like there is more dogma in 'Austrian school' anti-BTC analysis, less real consideration.

Changing in value is irrelevant, the value of Argentine pesos change in value (in American Dollars). Gold changes in value in terms of dollars and purchasing power daily in America

Retailers price goods in their native currency because they pay costs in their native currency. No Japanese sushi bar prices their tuna roll in US dollars. Pricing in bitcoin in a large scale is a requirement for it to be a money - well guess what, no merchants, governments, hookers, grocery stores, price their goods in GOLD. they price in the local currency and translate into gold if they would accept gold. No one is selling a condo for a fixed price of gold. You could convert the price in currency into the price in gold, you might even get the seller to accept gold - but gold fails your test - there is no large scale market for things priced in gold. It is illegal to price a contract in gold in America.

As for "just because something appears in a free market does not mean it cannot be criticized" What kind of straw man is that. I don't claim you cannot criticize bitcoin (you may criticize anything including products of controlled markets as well as free markets). I respond that your criticisms are lame. Many of your criticisms apply to GOLD (failure of a major market to price in gold, freedom from state interference - witness the illegality of contracts priced in gold in the United States)

Simply the point at which gold transactions meet retail transactions is the pint at which governments can control to a very great degree, and they do.

"Indeed, as Gary North astutely points out, top Bitcoin operators are now running to the government to be regulated (SEE Bitcoins, Stage 2: "Bring in the Feds!")"

I know that where I buy or sell gold they cooperate with the government in minute detail for every reporting or other regulation imposed on them. They all operate within the law and they all follow the law completely I don;t think any customer would ever ask them to do otherwise,

"No retailer is pricing goods in terms of Bitcoin. Prices are set in dollars and then a Bitcoin price is determined based on the then price of Bitcoin, BUT no one is setting prices or wages in a fixed amount of bitcoins, such pricing on a broad scale would indicate it is becoming a money, but that is not happening anywhere."

Name me the retailer who prices in gold. Or the property for sale in gold price. Or the Doctor who will quote a procedure in gold price. Hire a lawyer for ounces of gold.

"Bitcoin was, of course, created in part to cater to libertarian dreams – to provide a way to store your wealth where governments can’t steal it through taxation or currency debasement."

Krugman makes a statement here that is a logical fallacy, and in doing so makes an attempt at "divide and conquer" within the Libertarian spectrum of thought. We need to not fall for this.

Notice that Krugman has done a skillful job at conflating the issues to imply a failure of Bitcoin is a failure of libertarianism. The non-technical audience that Krugman writes for will have the notion reinforced that government needs to be involved with money because otherwise *THIS* very thing will happen if we let the Libertarians have their way.

Of course, he neglects to talk about the Federal Reserve and how it devalues money, destroys wealth, creates the business cycle by misdirecting investment and creating moral hazards.

You're exactly right that Bitcoin fails in its capacity as a virtual currency. It's going to be extremely hard for anything to be successful in that capacity as long as government has a monopoly on money.

When you are mature enough to have an intelligent discussion without resorting to ad hominem attacks then I will be happy to answer your questions or counter your arguments when I feel you are missing an important point.

You can't ram dollar bills down a transmission wire, either. But if gold coins were allowed to legally complete with Federal Reserve Notes, most gold transactions would utilize all of the same electronics means available for transferring money from one account to another. We would have credit cards, debit cards, online banking, etc. The only difference would be that the accounts would all be 100% redeemable in gold.

Didn't the Fed manage to inflate the money supply under a gold standard?

I'd like to see the Fed inflate the bitcoin supply.

You seem to forget that gold, to be useful in the digital age, must be represented by digital account balances, and that those balances must be maintained by some central authority.

Once gold is represented by digital account balance, the gold itself becomes pointless. All it does is sit in bank vaults as ingots. The only purpose of the gold standard is to limit the money supply.

Bitcoin solves this problem. Bitcoin has all of the benefits of digital gold account balances without any of the downsides. No centralized authority, no central server to control, and it is completely IMPOSSIBLE to inflate the public ledger.

Well, you said gold is useless in a world of digital commerce. But dollars seem to work OK in digital commerce. Considering that gold reserves can't be inflated by money printing or fractional reserve banking, I think they would work far better than dollars (for the people, that is, not the plutocrat overlords). As for Bitcoins, they haven't proven themselves yet. I think it's a matter of trust. I don't trust them because I can't hold them in my hand. If an electromagnetic pulse knocks out the grid for months, Bitcoins would be useless. I'd rather have gold or silver coins, as well as other tangible goods.

The Fed didn't inflate the supply of gold, as I understand it. I did change the price of gold as denominated in dollars. Under a true gold standard, the unit would not be "dollars," but "ounces" or "grams." Then I could sell a car for 11.54 ounces of gold rather than 15,000 dollars.

You can't ram dollar bills down a transmission wire, either." You can order something using your bank account. The customer can redeem his money in bills. So it's a stupid analogy.

"But if gold coins were allowed to legally complete with Federal Reserve Notes"

But they're NOT allowed to do that, are they? End of story. Hence, the attempt at coming up with an alternative. It is truly astonishing supposedly smart people cannot understand this.

"We would have credit cards, debit cards, online banking, etc. The only difference would be that the accounts would all be 100% redeemable in gold. "

Yes, and if we were living in a libertarian world, there'd be no more government, and attempts such as Bitcoin would have never been necessary in the first place.People want solutions NOW, instead of hoping for a time when everybody is using gold again.

Let me state unequivocally and with full confidence that if someone were to base a digital currency on the gold standard that it would immediately dominate the market. So in that regard I'm confident you are wrong.

Now, if someone did so and the government intervened, then it would have the same problem as Bitcoin.

Regardless, your claim that gold is "worthless" in digital commerce is completely false on many levels as gold is already a part of "digital commerce".

I only order my gold/silver online and across state borders. I'll leave it to you to figure out why.

Tony: Your argument evidently is that Bitcoins are better form of money than gold because the government (for now, anyway) allows Bitcoins to be used as money, whereas it does not allow gold to be used as money. That's like saying that if the government only allows us to wear government-issued uniforms, that is "better" than wearing whatever the hell we want, because "We're not allowed to do that, are we? End of story." In other words, we should just shut up, do only what Big Brother allows us to do, and quit talking about freedom.